In the continuing void at the federal level, more and more states are being proactive in adopting legislation that seeks to protect US residents’ personal data, and to impose stricter guidelines on companies that experience a data breach.

Although Washington State did not pass its previously pending bill that would have been more stringent on data controllers and processors than the looming Consumer Privacy Act of California, Washington did adopt new terms for its breach notification statute.  Effective as of March 2020, a “breach” requiring notice will include unauthorized access, disclosure, alteration and/or compromise of biometric and/or health data (previously excluded from the definition of personal information). Further, the window in which the entity suffering a breach must give notice has been reduced from 45 days to 30 days.

Many states, including New Jersey, New York, Florida, and Texas, have either adopted or are considering proactive legislation that will require those controlling and/or processing personal data to take “reasonable” measures to protect that data while under that entity’s control.

Without a consistent definition of “personal information,” what constitutes a “breach,” and what are “reasonable” measures, it is challenging for businesses to prepare.  That said, businesses that fail to take “some” measure to protect data will likely find themselves subject to liability even without its jurisdiction having in place proactive legislation. As discussed in the Dittman case, a data breach is a “foreseeable risk” against which companies have a “common law duty” to protect personal data.

Resources are available to help companies to take steps toward being “reasonable” in collecting, receiving, storing, processing, sharing and destroying data.  Looking for those resources is the first step toward being a responsible data controller and processor.  In New Jersey, the NJCCIC offers insights weekly into the latest threats.  NIST has frameworks for small and midsize businesses, as well as for larger entities.  SANS has forms that serve as useful starting points for developing policies and procedures.  The process can be done, but it can no longer be ignored.

For guidance on how to begin, please contact our offices.

Wipro, one of the world’s largest outsourcing companies, has confirmed that it was the subject of a cyberattack and that its attackers used – and may be continuing to use – access to Wipro’s systems to launch phishing campaigns against the company’s customers.

The investigation is ongoing, but if you or your clients use Wipro, please be wary of any communications that appear to come from the company. Training for personnel is the first line of defense. If an email, text or other inquiry seems odd or an attachment was unexpected, pick up the phone to verify the source or request before responding or clicking on a link.

Be alert and be secure.

Cybersecurity and data privacy remain at the top of the corporate agenda, and it is critical that executives stay ahead of the curve with the latest best practices in order to effectively respond when – not if – an data incident occurs.

To that end, I am pleased to offer a Lorman Education Service’s webinar, “Data Security Breach Response,” which I co-presented alongside my friend and colleague, Brett Harris of Wilentz, Goldman & Spitzer.

The webinar covers a range of topics critical to legal counsel and corporate officers alike – including the legal and practical ramifications of a data breach; incident response and breach notification obligations under applicable laws; brand and reputation implications; strategies to create a sound security culture within your organization; and administrative, technical and physical security measures to help manage risk.

To access the webinar, please visit Lorman’s website.

The time for businesses to wait until they are breached to respond to data vulnerabilities is coming to an end.  While 50 states have breach notification statutes (reactive legislation), more than 25 states have now adopted some form of proactive legislation requiring companies to take “some” measures to protect the personally identifiable information they collect, store, process and share.  The New Jersey legislature is now considering three competing bills.  While it is yet to be seen which draft will finally land on Governor Murphy’s desk, it is reasonable to expect that by the end of this year, New Jersey businesses will, by law, have to adopt measures to securely collect, store, share and destroy sensitive data.  One focus of this growing wave of proactive legislation concerning protections of personally identifiable information is the collection and protection of biometric data.  “Biometric data” is personal data related to physical, physiological or behaviors of an individual which allows for the unique identification of that individual, such as a fingerprint, facial recognition, or retina scan.  Biometric data can provide efficiency, valuable customer insight and convenience to a business.  A business may use this data for its time clock or to limit access to restricted areas within a facility.  Entertainment venues use biometrics to speed along the customer experience, while collecting valuable data as to how and when customers use different areas of those venues. There is no question that the use of biometric data has commercial benefits for employers, consumers and data analysts.

But consider this:  when your credit card is stolen, you call the credit card company and a replacement card is mailed to you overnight.  Who do you call when your fingerprint, stored by your employer or an amusement park, is compromised by a data breach?

Illinois and Texas already have in place statutes that prohibit commercial entities from capturing an individual’s biometric identifier (e.g. a fingerprint) without the person’s consent.  Both states also require businesses to protect biometrics using “reasonable” measures, and at least the same care that a business uses to protect its own sensitive information.

Most recently, New York, Massachusetts and Florida are considering legislation similar to the Illinois Biometric Information Privacy Act (“BIPA”).

Why is all this so important?  It comes down to a question of transparency, foreseeability and standing.

Transparency:  One of the hallmarks of the Illinois and Texas statutes is that businesses cannot collect biometric data without a person’s consent.  This consent requirement is consistent with one of the cornerstones of the National Institute of Standards and Technology Framework:  transparency.  Does the consumer or employee know what is being gathered by a commercial enterprise, understand why it is being gathered and have an opportunity to consent or deny consent to that collection?  If the answer to any of these questions is no, even without a breach having occurred, a company may be liable.  And if the company has a website from which personally identifiable information is collected, and the site does not, with clarity, explain what the company collects, how they use the data, with what other entities they share the data, and a person’s rights regarding the data, the company may already be in violation of several states’ laws.

Foreseeability:  As the Pennsylvania Supreme Court ruled in Dittman v. UPMC, No. 43 WAP 2017, 2018 WL 6072199 (Pa. Nov. 21, 2018), data breaches are a foreseeable risk, and businesses have a common law duty to protect sensitive information from unauthorized access, theft, alteration or destruction from that foreseeable risk.  If a company is known to collect and store biometric data, that company is a likely target for bad actors seeking valuable biometric data.  As such, even in a jurisdiction without proactive legislation like Illinois, the company may be held liable if that data is stolen and the company failed to take measures to protect the data from the foreseeable attack.

Standing and damages:  Many cyber breach cases have failed due to the court finding a “lack of standing” – or that a matter is not “ripe” because the aggrieved party cannot demonstrate actual loss.  Just because your credit card was stolen, did you suffer harm?  Probably not:  the credit card company replaced the card at no charge to you, and backed out any fraudulent charges.

However, for the theft of irreplaceable biometric data, at least according to the Illinois Supreme Court, the analysis is different.  In an Opinion filed January 25, 2019, the Illinois Supreme Court held in Rosenbach v. Six Flags Entertainment Corp., 2019 IL 123186 (Jan 25, 2019), that an individual need not allege actual damages or an adverse effect, beyond violation of his or her rights under BIPA, in order to qualify as an “aggrieved” person to be entitled to seek relief under BIPA.  In this case, Rosenbach – a mother alleging injuries on behalf of her son – filed suit against Six Flags after learning that the defendant collected fingerprints from her son in order to process and maintain his season pass to the theme park.  No prior notification had been provided as to the specific purpose and length of term for which the fingerprints were being collected.  Further, the plaintiff asserted that failure of the defendant to obtain the plaintiff’s or her son’s consent violated BIPA.  Notwithstanding that no “actual” damages were shown, the Illinois Supreme Court’s holding reversed the Illinois state appellate court’s prior decision which held that it was insufficient for the plaintiff to confer standing to sue under BIPA without showing actual injury.

Existing and pending legislation, together with recent court rulings, have made it clear that companies need to be prepared for the inevitable attack on its data. Companies need to explain to “data subjects” what is being collected and why, they need to protect the data they gather, and they need to be ready to respond when an attack does occur. The message from state legislators, courts and customers is clear: prepare and protect now, or prepare to be held accountable.

From a cybersecurity and data protection perspective, traveling safely on business or pleasure is not an easy task.  But if you are mindful of what you do, and where you do it, you and your information can travel more securely.

Here are ten practical cybersecurity and data protection tips to keep in mind:

  1. Devices that you will be working on should be encrypted and up to date with security patches.  Even if your device is compromised (and this can happen any number of ways), the data stolen is unintelligible to anyone without the decryption key.
  2. While working on a plane, train or automobile, at the terminal or any other public venue using your laptop, use a privacy screen so the nosy traveler next to you, or walking down the center aisle, does not see your screen or your work.
  3. Consider traveling with your own cellphone charger or power bank.  The charging towers in some airports and terminals (particularly outside the US) have been found to have been tampered with so that when you plug in your device to charge, you are unwittingly sharing your data through malware installed in the charging tower!
  4. If you need to use the hotel or other third party computer to print out your boarding pass, (i) remember to log off the computer when you are done, (ii) do not ask to be remembered, and (iii) be mindful of who may be around you as you enter your credentials.
  5. If you are working at a hotel or third party location, do not assume that the Wi-Fi network you log into is the actual hotel network.  Hackers can easily spoof hotel Wi-Fi addresses to trick you into using their network – all the while, capturing your activities as you unsuspectingly work or shop online.  Best practice is to use your own hotspot.
  6. Confirm whether your company can remotely wipe your device – whether it is a laptop, phone or otherwise.  Then, if the device goes missing or is stolen, sensitive data can be wiped remotely. This obviously assumes that you have either memorized, or traveled with a hardcopy of, your office’s contact numbers to report lost devices as you will no longer have access to the stolen or misplaced device.
  7. Remember that devices used to print documents store images of those documents.  As such, before you have your office fax you documents or email information to a third party’s computer while you are traveling, be mindful that the third party printer or fax machine is retaining your data long after you are gone.  Better practice would be to read the document on your device or have your office overnight the materials, where possible.
  8. While traveling, if you are working on a printed, sensitive document (cover page reads, the “Merger of ABC into 123”), consider first printing a sanitized cover page, or replacing parties’ names with numbers in the document, so that your paper version does not reveal sensitive information to a third party.
  9. Do not check your bag with devices inside – whether as checked luggage, at the hotel or at the courtesy club for your airline.  You cannot assume that persons holding your items and/or having access to the holding area could not, or would not, access or steal your devices.
  10. Train your team to know that nothing is so critical that it cannot be confirmed by a phone call when you are traveling. There is not a wire transfer that must be made and there is not data that must be transmitted just as you are boarding a plane without first verifying with you by telephone.

Enjoy the trip and be smart so that someone else does not take you or your data for a ride.

On November 21, 2018, the Pennsylvania Supreme Court, the highest ranking state court in Pennsylvania, ruled that an employer had a common law duty to exercise reasonable care to protect employees’ personal data where, as a condition to employment, the employer (i) required employees to provide sensitive data, (ii) the employer chose to store such data, and (iii) the collection and storage of that information by the employer could foreseeably expose the employees to “unreasonable risk of harm”. Dittman v. UPMC, No. 43 WAP 2017, 2018 WL 6072199 (Pa. Nov. 21, 2018).

In a class action, the Court accepted the employees’ argument that this duty included the obligation to take “reasonable measures to protect” the data from “foreseeable risk that [hackers] would attempt to access and [comprise and/or steal] that information.” The court further accepted the employees’ position that the intervening criminal action by the hackers did “not eviscerate the duty …to take reasonable anticipatory measures against foreseeable criminal conduct…”

Note that the Court stopped short of defining what “reasonable” care would have been in this case, but the Court for purposes of this ruling accepted the employees’ statement that the employer failed to encrypt the data at issue, did not have appropriate firewalls or other “reasonable” measures.

It is critical for employers in any jurisdiction to take note of this ruling. Pennsylvania, like the majority of states in the US, does not currently have a statute requiring companies to affirmatively protect sensitive information. However, the Court here found that this duty exists in common law.

Moreover, it is reasonable to assume that the next retailer hit with a major credit card breach will be subject to similar claims and have potential liability where, customers, if paying by credit card, must provide personal payment information to the retailer, unless that retailer can prove it adopted “reasonable” measures to guard against the “foreseeable” risk that such data may be subject to compromise.

In light of the Pennsylvania court’s ruling and two recent decisions in the U.K. and North Carolina, companies are strongly urged to take action now – if they have not already – to undertake “reasonable” measures to (i) identify the sensitive data they collect and store, (ii) protect that data from foreseeable compromise – considering the type of data stored, and the company’s size and resources, (iii) be vigilant in monitoring its systems to detect compromises quickly, and (iv) have a written response plan for when, not if, an attack occurs.

And for those resisting cyber insurance and crime coverage, you may wish to reconsider in light of these rulings.

In the wake of GDPR and California’s new data privacy law, website privacy policies continue to be a hot topic for the business community.

These pieces of legislation, the FTC Act, and various other sectoral and state laws and regulations set forth a myriad of complex rules and guidelines for website privacy policies.  At a minimum:

  • Privacy policies should clearly and concisely state:
    • What information is being collected when a person visits your site
    • Who else may have access to that information
    • Site visitors’ options – to opt in or opt out – without complicated or costly means to do so
    • How you will communicate with your customers/site visitors if their data is compromised (if you wish to avoid more costly or public means of breach notification that may be mandated by certain jurisdictions)
    • Whether you are tracking site users’ locations (and with California and EU site visitors, this cannot be done without clear disclosures and consent)
    • How cookies are being used
    • How long is information retained
  • They should not be materially misleading.
  • Consent:  If you are, or think you might be, subject to GDPR and/or if you are inviting or expect site visitors from California, your website should take the “opt-in” approach (without pre-checked boxes to receive future correspondence or advertisements)
    • “Consent” under GDPR for direct consumer marketing must be freely given, specific, informed, and unambiguous.
      • Site visitors should not be penalized if they choose not to consent.
    • Your customer must know to what they are consenting, and you cannot repurpose consent given for one activity for another, unrelated activity.
  • Your website should include mechanisms to allow a data subject to request (i) confirmation and/or correction of information you have about that person, (ii) that you remove (the right of “erasure”) that person’s data from your systems, and (iii) that you transfer their information to a third party
  • If your website processes payment transactions, it must be PCI compliant.
    • If the website uses a third-party payment processor, this should be clearly stated on the website and you should review your contract with that processor as to indemnification, notice obligations and liability disclaimers or limits if the processor experiences a breach.

In addition to the issues highlighted above, there are many other cyber and data protection-related considerations associated with websites and the disclosures in privacy policies.

Regardless of whether you are subject to GDPR, if your stated privacy policy, terms and/or conditions are misleading and/or deceptive, you will be inviting federal and state claims of deceptive and/or unfair trade practices.

However, there are other issues that many companies either ignore or neglect, including:

  • Reviewing advertising insurance coverage
    • Even if you have general commercial liability insurance that includes advertising coverage, it may NOT include coverage for your digital advertising. If you do not know the answer to this, we urge you to ask your broker!
  • Assessing whether the website is ADA compliant
    • Circuit courts around the country are split on their application of Title III of the Americans with Disabilities Act (“ADA”) to websites. However, many courts are taking the position that because websites are “places of public accommodation,” they are indeed subject to the ADA.
  • Clear and complete disclosure of warranty terms
    • It is worth noting that different laws apply if you are a manufacturer or a retailer.
    • In New Jersey, retailers must comply with the state’s Truth-in-Consumer Contract, Warranty, and Notice Act.
  • Disclosure of pricing, shipping, handling and return mechanisms, requirements and limitations
  • Review of general website terms and conditions
    • Do they protect your intellectual property?
    • Do they disclose third-party links?
    • Do they address the intended or unintended collection of information about minors?
    • Do they clearly state dispute resolution mechanisms?

For any business – but particularly for a business new to the internet or e-commerce – it is easy to purchase a website “kit” without giving the necessary thought to these and other considerations. If you are just establishing an online presence, do not just “cut, paste and go.” And if your business operates an already-established website, the stated terms, conditions, privacy policy, and notices should be reviewed at least annually.

A website is a wonderful way to promote and expand your brand – provided it is appropriately established, maintained and protected.

One of the most common misconceptions surrounding cybersecurity and data protection measures is that they are too expensive to deploy and maintain – so much so that they become prohibitive for small and middle market businesses. Another one I hear often is that the implementation process can seem daunting for business owners who may be unsure about where exactly to begin.

While top-of-the-line cybersecurity programs and managed IT service packages can certainly be expensive and complex to deploy, there are several, low or no cost measures that are worth considering. An ounce of prevention, even on a limited budget, can go a long way.

1. Password protocols and two factor authentication

  • Passwords should be (at least) 10 characters
  • Changed quarterly
  • Kept in a secure location
  • Change default passwords
  • Two factor authentication can be established with minimal (or no) cost

2. Patch early, patch often: All computers and other devices should be updated regularly

3. Bank online through one, isolated computer that is not used for any other purpose, and which is not connected to the business’ local area network

4. Train your personnel on cyber mindfulness

  • More than one-third of ransomware attacks are launched via a phishing email
  • Verify from a known source – pick up the telephone!
  • If you see something, say something…

5. Least rights – for small organizations, everyone wears multiple hats… but for sensitive information, minimize who has access to the crown jewels

6. Back up your data

7. Encrypt your data

8. Secure your physical environment

9. Due diligence: read your contracts, your privacy policies and understand your legal obligations

10. Have a plan!

  • The day you discover you have had an incident is not the day to figure out “now what”?
  • PTA calling tree
  • Do NOT store the plan on the computer!

If you’d like to keep these tips at hand, they are available for download here. Be smart and be safe!

Cybersecurity is a hot button for all businesses these days. However, in the flurry of new privacy regulations and the focus on protection of consumer data, many businesses are not paying enough attention to how they could – and should – be using cybersecurity protocols to protect valuable trade secrets.

Trade secret protections apply broadly to business, financial and technical information, so long as: (1) the information is not generally known or ascertainable outside the owner’s organization and control; (2) the owner derives independent economic value or business advantage from the information not being known; and (3) the owner makes reasonable efforts to preserve its secrecy.  The unauthorized disclosure of trade secrets can lead to loss of strategic advantage over competitors and harm to your company’s finances and reputation. Failing to adequately protect trade secrets could also result in losing a misappropriation case against a bad actor.

Trade secret rights are secured and maintained solely by “reasonable efforts” to preserve their secrecy, which must be both internal (i.e., with employees) and external (i.e. with third party vendors).  While appropriate steps to protect trade secrets include offline actions like using non-disclosure agreements or physically locking confidential information away, courts are also now considering the adequacy of cybersecurity measures when they analyze reasonable efforts.

So, in the trade secret world, what is a reasonable “cyber” effort?  Like cybersecurity technology, case law on this issue is continuously evolving.  However, if you possess any trade secret information that is stored or communicated electronically, we recommend, at a minimum, the following:

  1. Ensure you have appropriate access protections in place. Trade secret information should be password protected and stored on a secure server.  Review your firewalls, encryption procedures, anti-virus software and the like.  Stay current with software patches and consider encryption for data at rest as well as for data in motion.  Access credentials should require multi-factor authentication.
  2. Limit the people who have access to your electronic information (think “least rights” access). Consider limiting electronic access to those specific employees or agents who actually need the information.  The more people who have access to trade secrets (and the ability to share it with just the click of a mouse), the higher your risk of breach or misappropriation.
  3. Train your employees and agents on appropriate use of your electronic systems. For example, remind them not share their passwords with anyone (even co-workers) and educate them on using company devices (like laptops and smartphones) correctly when they are offsite.  Consider how your employees connect to your system when working remotely (i.e. require them to only use password protected Wi-Fi networks, and not public Wi-Fi).  Think about limiting or prohibiting use of USB ports or other portable drives on company computers.  Teach your employees how to recognize phishing attempts.
  4. If you allow employees to access your systems from personal devices, consider an appropriate “BYOD” (bring your own device) policy and technology to secure the work environment on those devices.
  5. Restrict departing employees’ access to electronically stored information. Following termination, disable access to IT systems, change passwords, and make sure company-owned devices are returned.
  6. Ensure that you are monitoring and improving your cybersecurity efforts periodically. Consult experts about the latest developments in technology.  Conduct regular training about appropriate use of electronic systems and advise your employees of the risks of failure to follow protocol.
  7. Revisit confidentiality agreements with third parties and consider whether they reflect cybersecurity protocols.

Once your “crown jewels” are exposed, you cannot “recapture” them.  Be smart, be secure and be prepared.

One of my husband’s goodhearted employees nearly fell victim to a scam that has been rampant throughout the country. The employee received an email from a senior staff member (or so it seemed) asking if he was in the office. It was early on a Friday morning, before many people had arrived. The employee, never wanting to disappoint, responded yes. The alleged senior staff member then asked the employee for help – asking if he could go to a nearby drug store, purchase several gift cards and then send him the redemption codes. The employee got as far as purchasing $500 worth of gift cards before he took a moment to think about what he was doing. Just prior to sending the codes, he picked up the phone to confirm with the senior staff member…

While the employee ultimately realized he might be the subject of a scam, too many people take action without first verifying. By our nature, people are helpful. We hold the door for others and offer to send money to someone in need. Scammers are all too happy to take advantage of our good nature. Sadly, in this day and age, we need to take that extra minute or two (or three) to pick up the phone and verify. Being helpful is wonderful – but being smart is self-preservation.

And, for employers, this type of scam is best combated by proper and regular cyber training for your personnel. More than half of reported breaches (and some in the headlines), begin with employees responding to this type of phishing email, a spoofed account or a suspect link. Be smart and be secure.